• Corporate
  • Governance

Corporate Governance Statement in accordance with Sections 289f, 315d HGB

In the Corporate Governance Statement in accordance with sections 289f, 315d HGB, freenet AG displays its current Declaration of Compliance in accordance with section 161 of the German Stock Corporation Act (AktG) and explains the relevant disclosures about corporate management practices that are applied over and above the statutory provisions. In addition, the working practices of the Executive and Supervisory Boards are described and the composition and working practices of the Supervisory Board’s committees are disclosed. Also to be found in the following are the information regarding the percentage of women in the Executive Board and in the two management tiers below the level of the Executive Board, as well as information regarding compliance with minimum percentages of women on the Supervisory Board.

freenet AG made the following Corporate Governance Statement in accordance with sections 289f, 315d HGB which is simultaneously a part of its management report for the financial year 2020.

I. Statement on the german corporate governance code in accordance with section 161 of the german stock corporation act (AKTG)

The Executive Board and the Supervisory Board issued the following Declaration of Compliance in accordance with section 161 AktG. The first part of the declaration refers to the Code as applicable until 20 March 2020 and the second part refers to the version applicable since that date.

I. Since submitting the last Declaration of Compliance on 3 December 2019, freenet AG has complied with the recommendations of the GCGC as amended on 7 February 2017 (“2017 Code”), with the following exceptions:

1. The company has taken out D&O insurance for its board members. No deductible has been stipulated for Supervisory Board members because it is not evident that this would benefit the company. It is taken for granted that all Supervisory Board members carry out their duties responsibly. In order to treat all the Supervisory Board members equally, moreover, any deductible would have to be set at a uniform level, even though the members’ personal financial backgrounds vary. A deductible would therefore not have an equal impact on the members of the Supervisory Board. As their responsibilities are the same, this does not seem appropriate. (2017 Code: clause 3.8 (3))

2. The company is highly committed to transparency in its reporting. This also applies to the remuneration of the Executive Board members, the separate components of which are disclosed and discussed individually in the remuneration report. Nonetheless, the Executive Board and Supervisory Board have decided not to use the model tables in the remuneration report to present the Executive Board’s remuneration. Although the service contracts with the Executive Board members provide for caps, there is a risk that the disclosure of maximum amounts for share-based payment components creates an impression which is inconsistent with the actual assumptions for the performance of the share price. (2017 Code: clause 4.2.5 sentence 5 and 6)

3. When appointing new members to the Executive Board, the Supervisory Board so far has appointed candidates who were best suited, in particular because of their knowledge and skills acquired in the course of their many years of service in the company. In contrast, the criteria for the composition of the Executive Board mentioned in clause 5.1.2 (1) of the 2017 Code were not the focus of the Supervisory Board's attention when previous appointments were made and from the Supervisory Board's point of view were secondary to the candidate’s specific suitability. (2017 Code: clause 5.1.2 (1))

4. No age limit has been set for members of the Executive Board and the Supervisory Board. It is not evident why qualified individuals with relevant professional and other experience should not be considered as candidates solely on the grounds of their age. (2017 Code: clauses 5.1.2 sentence 8 and 5.4.1 sentence 2)

5. The Supervisory Board has not set any specific targets for its composition, as defined in clause 5.4.1 (2) and 5.4.2 sentence 1 of the 2017 Code. Neither has it drawn up a profile of skills for the entire Supervisory Board for that reason. It could therefore not follow the recommendations made in clause 5.4.1 (4) of the 2017 Code. When proposing new members for election, the Supervisory Board has so far been guided solely by their suitability. (2017 Code: clauses 5.4.1 (2), (4) and 5.4.2 sentence 1)

6. Clause 5.4.6 of the 2017 Code recommends linking performance-related remuneration for Supervisory Board members to the sustained performance of the company. The Supervisory Board’s variable remuneration is set according to the dividend for the past financial year, in line with section 11 (5) of the company’s articles of association. This form of variable remuneration has proven its worth in the past. (2017 Code: clause 5.4.6 (2)

II. freenet AG will comply with the recommendations of the German Corporate Governance Code as amended on 19 December 2019 and announced on 20 March 2020 (“2019 Code”), with the following exceptions:

1. Age limit for Executive Board and Supervisory Board members

a) Recommendations B.5 and C.2:

B.5: An age limit shall be specified for members of the Executive Board and disclosed in the Corporate Governance Statement.

C.2: An age limit shall be specified for members of the Supervisory Board and disclosed in the Corporate Governance Statement.

b) Statement of non-compliance:

The Supervisory Board has not specified an age limit for members of the Executive Board and has not disclosed it in the Corporate Governance Statement as such a limit is not practically relevant. In view of the age structure of the current Executive Board, no change is currently envisaged.

No age limit has been specified for the members of the Supervisory Board either. The Supervisory Board does not believe that qualified individuals with relevant professional and other experience should not be considered as candidates solely on the grounds of their age. Therefore, no change is envisaged for this either

2. Other seats held by members of the Executive Board

a) Recommendation C.5:

Members of the Executive Board of a listed company shall not hold, in aggregate, more than two Supervisory Board seats in non-group listed companies or comparable functions, and shall not accept the chairmanship of a Supervisory Board in a non-group listed company.

b) Statement of non-compliance:

The chairman of the Executive Board, Christoph Vilanek, currently is a member of two Supervisory Boards of listed companies: CECONOMY AG, Düsseldorf, and Ströer SE & Co KGaA, Cologne, where he is also chairman of the Supervisory Board. freenet AG holds an equity interest in CECONOMY AG. freenet AG therefore has an interest in being represented on the Supervisory Board of CECONOMY AG to reflect its importance for the company.

The Supervisory Board, through the personnel committee of the Supervisory Board, has approved all of Christoph Vilanek’s seats and considers the time required for the external memberships to be reasonable compared with the experience gained by the chairman of the Executive Board. This also applies to his post as chairman of the Supervisory Board of Ströer SE & Co KGaA.
II. Relevant disclosures on corporate governance practices

Freenet AG has a compliance system that is continuously expanded and enhanced. The freenet Group’s chief compliance officer (CCO) reports directly to the Executive Board. He helps the Executive Board to highlight the legal requirements that are relevant for freenet AG and to implement them accordingly within the freenet Group, as well as to adapt the compliance system to changing requirements. In addition, current developments are regularly assessed on the Governance Board by the CFO together with the CCO and the Head of Audit and Fraud Management and measures are derived, if necessary. The CCO also reports regularly to the Supervisory Board’s audit committee. The CCO informs the Supervisory Board whenever risks arise which endanger the continued existence of the freenet Group.

The freenet Group is fully committed to upholding the prevailing laws and statutes. For the freenet Group, compliance means that statutory provisions are adhered to, the Group’s own rules and in-house guidelines are observed and criminal acts are prevented. The company does everything it can to ensure that compliance violations, such as fraud, corruption, anti-competition practices and data privacy violations do not arise in the first place. As soon as misconduct and infringements of compliance become evident, these are brought to light and tackled decisively.

The freenet Group’s managers set a good example in upholding compliance and ensure that any significant steps taken within their own fields of responsibility are in accordance with the respective statutory provisions and its own values and rules.

The compliance organisation can be approached by any contact person for advice on individual issues.

The Compliance unit has developed a whistleblower tool and implemented it within the freenet Group. It enables internal whistleblowers or suppliers to give tip-offs anonymously as soon as infringements of compliance come to their attention. All tip-offs are investigated promptly as part of a transparent and accountable process in which the interests of the whistleblower, the persons affected and the company are taken into account.

The aim is to enable the company to take systematic and appropriate action immediately when compliance is violated and thereby to avert economic or reputational damage to the freenet Group and the affected stakeholders. In order to ensure the proper, swift handling of tip-offs in accordance with the whistleblower process, the freenet Group has set up a whistleblower committee. Permanent members of the whistleblower committee are the CCO as well as the responsible head of Internal Auditing and the head of Fraud Management. The whistleblower committee is responsible for the operational implementation of the whistleblower process.

A centralised fraud management unit has also been set up, which in coordination with the individual fraud management functions in the specialist departments of the freenet Group, is responsible in particular for the introduction and improvement of effective preventive measures and processes for preventing damage to the freenet Group caused by fraud, and for investigating fraud.

The significance of data protection has increased continuously in recent years. The freenet Group is aware of its special responsibility with regard to the handling of the personal data of customers, suppliers, contractual partners and employee, especially given the General Data Protection Regulation (GDPR) and special regulations applying in the telecommunications sector. It is therefore important to protect this data against unauthorised access. For this reason, the Group uses modern security technologies and regularly draws the attention of its employee to this subject in order to continuously improve the overall security level and to meet the challenges posed by the growing threats.
III. Working practices of the Executive Board and Supervisory Board
freenet AG’s Executive Board and Supervisory Board work together in a close and trusting manner in their management and supervision of the company.

It is the duty of the Executive Board, as the parent company’s management body, to serve the interests of the company. It currently consists of five members. The Executive Board’s work is governed by its rules of procedure. The members of the Executive Board are jointly responsible for corporate management as a whole. In other respects, each Executive Board member is responsible for their own sphere of business. The Executive Board members work together in a spirit of cooperation and inform one another about facts and developments in their respective spheres of business at regular Executive Board meetings. In addition, the Executive Board members attend regular meetings of the specialist departments. The Supervisory Board determines the areas of responsibility of the individual members of the Management Board in a schedule of responsibilities.

The Supervisory Board is convened at least twice in each calendar half-year. It generally makes its decisions at meetings requiring personal attendance, but also by way of telephone conferences or by written communications. The Supervisory Board regularly advises the Executive Board when the latter is making its decisions about the company’s management and also supervises its management activities. In so doing, the Executive Board includes the Supervisory Board in all decisions of a fundamental nature relating to the company’s management and reports regularly about the business performance, the corporate planning, the strategic development and the situation of the company. The Supervisory Board in turn conducts a detailed examination of all deviations of business performance from the plans and targets and discusses these with the Executive Board. It also conducts detailed checks on business transactions of significance for the company on the basis of Executive Board reports, discusses them and makes decisions as and when required. Outside of the meetings, too, the Supervisory Board members were informed by the Executive Board about current business developments.
IV. Composition and working practices of committees

The Executive Board has not constituted any committees.

The Supervisory Board has set up five committees. These committees prepare the topics and resolutions of the Supervisory Board which are due to be discussed by the full Board and in some individual areas are authorised to make decisions in place of the full Board. The committees carry out their work in meetings requiring personal attendance. In exceptional cases, however, the meetings can also be conducted by telephone. The committees discuss the items on their agendas and make decisions concerning these if required. The committee chairpersons report on the subject matter of the committee meetings to the full Supervisory Board. With the exception of the nomination committee, all committees comprise equal numbers of shareholders’ representatives and employees’ representatives.

Steering committee

The steering committee discusses focal topics and prepares Supervisory Board resolutions. It can take the place of the Supervisory Board, with the required approval of the Executive Board in accordance with the latter’s rules of procedure, in deciding on measures and transactions of the Executive Board, insofar as the matter in question cannot be deferred and it is not possible for the Supervisory Board to make an appropriate decision within the time available.

Members: Prof. Dr Helmut Thoma (chairman), Thorsten Kraemer, Gerhard Huck, Knut Mackeprang


Personnel committee

The personnel committee prepares the Supervisory Board’s personnel decisions. It submits to the Supervisory Board proposals for decisions on the Executive Board’s remuneration, the remuneration system and regular review of that system. The committee makes decisions in place of the Supervisory Board – but subject to mandatory responsibilities of the Supervisory Board – on Executive Board members’ business that is relevant for personnel.

Members: Prof. Dr Helmut Thoma (chairman), Sabine Christiansen, Claudia Anderleit, Knut Mackeprang


Audit committee

The audit committee concerns itself with the monitoring of the accounting process, the effectiveness of the internal control system, the risk management system and the internal auditing system, and auditing of financial statements, in the latter case especially with regard to the choice of auditor and their independence and the additional services rendered by the auditor, the awarding of the audit engagement to the auditor, the determination of key audit matters and the fee agreement. It is also responsible for approving the permissible non-audit services to be rendered by the auditor. It also concerns itself with compliance-related issues.

Members: Robert Weidinger (chairman), Marc Tüngler, Bente Brandt, Thomas Reimann


Mediation committee

The mediation committee is constituted in accordance with section 27 (3) of the German Co-determination Act (Mitbestimmungsgesetz–MitbestG) so that it can perform the task described in section 31 (3) sentence 1 MitbestG.

Members: Prof. Dr Helmut Thoma (chairman), Fränzi Kühne, Knut Mackeprang, Theo-Benneke Bretsch


Nomination committee

The nomination committee has the task of suggesting suitable candidates to the Supervisory Board for proposal to the Annual General Meeting in the run-up to new elections.

Members: Prof. Dr Helmut Thoma (chairman), Marc Tüngler, Sabine Christiansen


V. DEFINED TARGETS FOR THE PERCENTAGE OF WOMEN IN THE EXECUTIVE BOARD AND IN THE TWO MANAGEMENT TIERS BELOW THE EXECUTIVE BOARD; DISCLOSURES ON COMPLIANCE WITH MINIMUM PERCENTAGES OF WOMEN ON THE SUPERVISORY BOARD

In 2017, the Supervisory Board and Executive Board have each defined the following targets for the period until 31 December 2021 with regard to the percentage of women on the Executive Board and on the two management tiers below the Executive Board:

Target for 31 December 2021
Executive Board0%
Management tier 1 (direct reports)30%
Management tier 2 (heads of department)30%


The targets to be achieved in the last reference period by 30 June 2017 for the percentage of women on the Executive Board and on the two management tiers below the Executive Board as defined by the Supervisory Board and Executive Board were achieved as follows:

Target for 30 June 2017Actual of 30 June 2017
Executive Board0%0%
Management tier 1 (direct reports)25%40%
Management tier 2 (heads of department)27.5%33.3%


In the period under review, the percentages of men and women on the Supervisory Board complied with the legal requirement of a minimum percentage of 30 per cent.
VI. ON THE DIVERSITY PLAN FOR THE SUPERVISORY BOARD AND EXECUTIVE BOARD

The company has not adopted a formal diversity plan which defines the criteria for the composition of the Executive Board and the Supervisory Board with regard to aspects such as age, gender or education or career background.

With regard to its own composition, the Supervisory Board has complied with the legal requirements regarding gender diversity. The Supervisory Board has already dealt with diversity characteristics in the past and intends to take diversity criteria into account for the composition of the Supervisory Board, including aspects such as age, gender, education and professional background, when appointing shareholder representatives to the Supervisory Board in the future. In light of this, the Supervisory Board began developing a profile of skills in 2020 and will incorporate diversity criteria into this when making future candidate proposals to the Annual General Meeting.

Although the Supervisory Board is not currently pursuing a specific diversity plan for the composition of the Executive Board in light of the latest legal developments, it has decided – in a departure from previous Declarations of Compliance with the GCGC – to be mindful of diversity when replacing Executive Board members in the future.
VII. SELF-ASSESSMENT OF THE SUPERVISORY BOARD

The Supervisory Board and its committees regularly review the overall effectiveness of the Supervisory Board and how effectively its committees perform their tasks, either internally or with the involvement of external advisers. In the 2020 financial year, the Supervisory Board carried out a self-assessment based on a survey with external support from KPMG Law Rechtsanwaltsgesellschaft mbH. The Supervisory Board discussed the results of this self-assessment at length at its meeting on 23 September 2020. The results of the self-assessment confirm that cooperation both within the Supervisory Board and with the Executive Board is professional, constructive and characterised by a high degree of trust and openness. The results also confirm that meetings are organised and conducted efficiently and that the supply of information is sufficient. No fundamental need for change was identified. Individual suggestions are also highlighted and implemented during the year.
VIII. INDEPENDENCE

On the shareholder side, the Supervisory Board should include an appropriate number of independent members in accordance with the assessment of the Supervisory Board’s shareholder representatives. More than half of the shareholder representatives shall be independent from the company and the Management Board. The shareholder representatives on the Supervisory Board have determined that a share of at least four Supervisory Board members who are independent of the Executive Board and the company is considered appropriate. All six shareholder representatives currently on the Supervisory Board consider themselves to be independent from the company and the Executive Board.

In addition, no more than two former members of the Executive Board may hold seats on the Supervisory Board. Material conflicts of interest and those that are more than temporary in nature are to be avoided. Supervisory Board members should have sufficient time to fulfil their mandate to ensure that they can do so with due regularity and care.
IX. LONG-TERM SUCCESSION PLANNING FOR THE COMPOSITION OF THE EXECUTIVE BOARD

The personnel committee of the Supervisory Board, which is responsible for making preparations for Executive Board appointments, also oversees long-term succession planning for the Executive Board. This is done regularly when making new appointments or extending existing Executive Board appointments. The committee regularly reviews whether there is reason to give particular consideration to long-term succession planning and consults the chairman of the Executive Board as required. The chairman of the Supervisory Board also communicates regularly with the chairman of the Executive Board about succession options in good time prior to the expiration of Executive Board appointments.
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